October 7, 2019

Warren Buffett, the “Oracle of Omaha,” is considered one of the greatest investors of all time – perhaps the best ever.

He’s delivered investors an annualized return north of 20 percent for more than 50 years.

If you invested $100 at the start of his run, you’d have more than $2 million today.

In 2008, he wrote an op-ed in the New York Times saying we should buy stocks. I’d say he got that one right, based on market returns since.

When he speaks, people not only listen – they act.

Well, in the past year or so, he’s not as bullish, though he thinks a slowdown is still far off. However, his actions at his company Berkshire Hathaway tell a different story.

Right now Berkshire Hathaway is holding a record $122 billion in cash. That’s more than half of the value of the company’s entire investment portfolio of public companies.

In fact, more than a third of the firm’s portfolio is now cash. The only time it’s ever been higher was right before the 2008 financial crisis.

As we know, there aren’t a lot of growth opportunities in cash. Buffett obviously knows this too. So there must be a reason behind the cash hoard.

One of Buffett’s favorite metrics is total market capitalization relative to gross domestic product. This shows the ratio of the entire value of stocks to overall economic production.

Currently, it’s more than 150 percent today, meaning stocks are expensive. They’re more expensive now than during the last two bull market peaks in 2000 and 2007.

Many people want to emulate the best. Well, Warren Buffett is hoarding cash. Perhaps he’s yet again waiting to capitalize on some market corrections.